If you’ve been blaming reckless men for the collapse of America’s leading investment houses and the plunging markets, you may be on to something. High levels of testosterone are correlated with riskier financial behavior, new research suggests.

Overconfidence has long been noted by historians and political scientists as a major cause of war. However, the origins of such overconfidence, and sources of variation, remain poorly understood. Mounting empirical studies now show that mentally healthy people tend to exhibit psychological biases that encourage optimism, collectively known as ‘positive illusions’. Positive illusions are thought to have been adaptive in our evolutionary past because they served to cope with adversity, harden resolve, or bluff opponents. Today, however, positive illusions may contribute to costly conflicts and wars. Testosterone has been proposed as a proximate mediator of positive illusions, given its role in promoting dominance and challenge behaviour, particularly in men. To date, no studies have attempted to link overconfidence, decisions about war, gender, and testosterone. Here we report that, in experimental wargames: (i) people are overconfident about their expectations of success; (ii) those who are more overconfident are more likely to attack; (iii) overconfidence and attacks are more pronounced among males than females; and (iv) testosterone is related to expectations of success, but not within gender, so its influence on overconfidence cannot be distinguished from any other gender specific factor. Overall, these results constitute the first empirical support of recent theoretical work linking overconfidence and war.

Narcissists work on a big scale and are drawn to risky decisions. They go for large spending and investment, and love a merger or acquisition. The financial results under their leadership, the study found, are more extreme.